Further, the company’s profitability in the quarter was much better than a year ago. Its adjusted gross margin of 47.3% was 80 basis points higher than in the first quarter of 2024. Its adjusted operating margin was 6.0%, 100 basis points higher.

As a result of the margin improvements, its earnings per share increased by 260% to $0.18 from $0.05.

“Merrell and Saucony fueled our growth with double-digit revenue increases, and we more than tripled our earnings year-over-year, again delivering a record gross margin performance. We’ve worked to reinvent Wolverine Worldwide for the future–focusing squarely on awesome product, amazing stories, and driving the business,” stated CEO Chris Hufnagel in the company’s Q1 2025 press release.

How does the quarter stack up against previous first quarters? In terms of margins, reasonably well.

Its 47.3% gross margin in Q1 2025 was the highest over the past decade, according to S&P Global Market Intelligence. However, its EBIT margin in this year’s first quarter was 6.1%, which is better than it has been in recent years, but down from 11.5% in Q1 2018 and 11.0% in Q1 2021.

The headwinds faced, stemming from a shaky consumer and potential tariffs—since it manufactures most of its products through third parties in the Asia Pacific region—suggest that achieving double-digit EBIT margins may not be feasible in the near term.

So, Wolverine’s valuation is somewhat hamstrung in terms of multiple expansion along with higher profits.

According to Barchart data, nine analysts are covering WWW stock. Of those, all but one rate it a Strong Buy (4.78 out of 5), with a mean target price of $20.55, which is higher than its current trading price.

In 2025, analysts expect the company to earn $1.05 per share and $1.28 in 2026. It trades at 17.1 times its 2025 estimate and 14.0 times its 2026 estimate. Over the past decade, its forward EPS multiple has ranged from a low of 7.56 times in Q4 2022 to a high of 19.49 times in Q1 2021.

So, it’s neither cheap nor expensive, which suggests the analysts see the company continuing to improve profitability, leading to a higher multiple in the future.

Remember, one of its best first quarters in the past decade for EBIT margin was in 2021, when WWW stock was trading at almost 20 times forward EPS. If it doubles its EBIT margins in 2026, it will surely be a $30 stock by then, perhaps even higher. It traded in the mid-$40s in May 2021. It can get there again.

Betting on Wolverine isn’t a slam dunk by any means.

The tariff question remains a significant uncertainty for the entire global apparel and footwear industry. It’s impossible to know if the White House will ever solidify its trade plans for long enough so companies can make long-term plans.

That said, I think there’s enough meat on the bone to suggest that Wolverine is on the upside of resolving its past business issues, making it an attractive value play for risk-tolerant investors.

Which brings me back to the two unusually active call options from yesterday.

While the Sept. 19 $20 call is cheaper with a $1.15 ask price, the Dec. 19 $22.50 call has twice the days to expiration, for only $5 more. Sure, it’s further OTM (out of the money)—20.7% compared to 10.8% for the $20 call—but the additional time makes it worthwhile.

In the end, whether you bet on the $22.50 or $20 call, the worst-case scenario is that you lose $120.

I like the risk/reward proposition here.

On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com